Functional gamma-secretase inhibitors (FGSIs) can block the cleavage of several transmembrane proteins including amyloid precursor protein (APP), and the cell fate regulator Notch-1. FGSIs, by inhibiting APP processing, block the generation of amyloid beta (Abeta) peptides and may slow the development of Alzheimer's disease. FGSIs used to inhibit APP processing may disrupt Notch processing, thus interfering with cell fate determination. Described herein is a FGSI-mediated gastrointestinal toxicity characterized by cell population changes in the ileum of rats, which are indicative of Notch signaling disruption. Microarray analysis of ileum from FGSI-treated rats revealed differential expression responses in a number of genes indicative of Notch signaling perturbation, including the serine protease adipsin. We were able to show that FGSI-treated rats had elevated levels of adipsin protein in gastrointestinal contents and feces, and by immunohistochemistry demonstrated that adipsin containing ileum crypt cells were increased in FGSI-treated rats. The mouse Adipsin proximal promoter contains a putative binding site for the Notch-induced transcriptional regulator Hes-1, which we demonstrate is able to bind Hes-1. Additional studies in 3T3-L1 preadipocytes demonstrate that this FGSI inhibits Hes-1 expression while up-regulating adipsin expression. Overexpression of Hes-1 was able to down-regulate adipsin expression and block pre-adipocyte differentiation. We propose that adipsin is a Hes-1-regulated gene that is de-repressed during FGSI-mediated disruption of Notch/Hes-1 signaling. Additionally, the aberrant expression of adipsin, and its presence in feces may serve as a noninvasive biomarker of gastrointestinal toxicity associated with perturbed Notch signaling.